I recently was aprove for a consolidation loan with a rate of 29% to pay off all credit cards. I dont have anything negitive on my CR beside the high utilzation of CC. Im sure my score will shoot up. Could I apply for a better loan before the bad rate loan hits my credit report and just pay the bad loan off to put myself in a better situation. Is this a thing that ppl do or am I just over thinking it. If anyone have any experience with this pleae give me some insight.
I'm confused about the original loan being at 29%, as that doesn't seem any better interest wise (and perhaps worse) than the average of the rates you would have been paying on the CCs? I get it that for Fico scoring purposes you shuffled your debt from revolving to an installment loan, which could in theory improve your scores (say) 50-75 points... but getting rid of debt is more important than scores in 99% of cases. If I were you I'd look for a way to get rid of that high interest loan and obtain a low interest loan.
What were your Fico scores at the time you applied for the high interest rate loan and you had all the CC debt? Have all of your CCs reported to the bureaus yet with their lower/paid off balances? I'm curious to hear how much your scores go up. Based on your before/after Fico scores, you will probably have a pretty good idea as to whether or not you can grab a low interest rate loan.
Also keep in mind with the paying off of your CCs, you want to leave a tiny balance to report (say $5-$10) on just 1 of your credit cards and make sure it's a major bank card (not a store card or AU card) while all of the other cards report $0 to maximize your Fico scores leading up to your next app.
Did you already accept the bad rate loan?
If so, my first question would be why? But even if you did, this might not actually be so bad. You'd pay the cards off and your scores would likely have some nice gains, maybe positioning you to get a much better rate loan elsewhere.
Under manual review, another lending institution might be able to infer that it's a subprime lender, but your credit score doesn't know the interest rate there.
You don't mention who the new loan is with... some report immediately, some not until first payment is due...
In theory, with or without the new loan reporting, your scores will shoot up when you pay off your credit card debt.
When all of the reduced balances have reported to the CRA's, you should be able to qualify for a better rate with another lender.